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Electronics Makers Predict Grinch Will Stay Away

By Saul Hansell November 11, 2008 7:11 pmNovember 11, 2008 7:11 pm

Hewlett-Packard computers on display at a Best Buy store. (Credit: Paul Sakuma/AP)

For makers of televisions, cameras and other gizmos looking at the bleakest Christmas season in years, there is some solace: Things aren’t as bad for you as for other sorts of companies (well, unless you’re Circuit City).

While overall holiday spending is going to fall sharply this year, a new forecast by the Consumer Electronics Association estimates that sales by its member companies will rise, albeit by only 3.5 percent. That’s a lot less than the 12 percent gain in electronics sales in the fourth quarter of 2007 over 2006.

Still, that’s welcome news, considering that the association found that consumers are planning to cut their overall holiday spending — including gifts, entertaining and travel — by 14 percent this year.

The association tracks consumer moods in monthly surveys of 2,000 people conducted by telephone and over the Internet. It estimates wholesale electronics revenue from regular reports that all the big electronics companies make outlining their sales to retailers.

Amazingly enough, the association is sticking by the forecast it announced at the beginning of the year for overall electronics sales for 2008 to grow 7 percent from last year. The reason is that sales actually grew ahead of that pace in the first part of the year.

Based on the sales reports, the two fastest-growing categories of consumer electronics are navigation and video systems for cars, whose sales are expected to increase by 30 percent in the fourth quarter, and mobile phones, which are forecast to rise by 11 percent. Computer sales will fall by 1 percent, the association said.

Like most other surveys of consumer behavior, the association found that the vast majority of people think that economic conditions are getting much worse, and as a result, they are cutting back their holiday spending plans. Only 38 percent said their budget for gifts is $500 or more this year. Last year, 47 percent planned to spend that much.

Video game systems are still the electronics gift people say they plan to give most, but demand is off sharply for games compared to last year.

Flipping the question around to what adults want to get this holiday, the association found some weakness for electronics makers. Last year, the top wish was for a laptop computer. This year, computers were edged out by “peace and happiness,” which tend to have much lower profit margins.

I don’t get it. Unemployment is at its highest level in 14(?) years. Credit card debit is at an all time high. Mortgage defaults are piling up. Wall Street bonuses are slashed. Apparently no one can afford a new car…

yet people STILL have enough money to spend 3.5% MORE then they spent last year? I don’t understand — where in god’s name are people getting the money?

Or is this a last gasp hurrah before 25% of America decides between 1) hunkering down for a decade of no spending to pay off their accumulated debt, or 2) just plain ol’ declare bankruptcy?

The impact of a recession is all in the eyes of the beholders. The MSM should be drawn, quartered and banished to the wilderness for blowing the economic news all out of proportion (e.g., consumer spending “only” grew by 1.8% in September; GNP shrank by a HUGE 0.3%) rather than spending time educating viewers and readers about the cyclical nature of the economy and the fact that these numbers are preliminary estimates usually subject to significant revisions. Have we been overspending our means lately? Sure. Do we need to tighten our belts? Absolutely. But even 10% unemployment means 90% employment. A 3-4% foreclosure rate (that’s the high end of the estimates) means 96% of homeowners are capable of making their payments. Sure, credit is tight, but compared to buying a $50,000 SUV or a luxury week at a spa, a $2,000 Apple computer or $300 iPhone is a steal. Despite what the MSM says, the economy is NOT grinding to a halt. Congress would do well to understand that before pumping good money after bad in endless bailouts.